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Johannesburg - South African bonds were weaker in early trade on Wednesday, on the back of what a trader described as a massive sell-off on Tuesday by foreign market participants.
Data released by the JSE showed that foreigners were net sellers of R7.543bn of South African bonds including repo transactions yesterday.
According to Standard Bank analysts, yesterday's poorly received Italian bond auction, combined with suggestions from officials that China should not be expected to be the "buyer of last resort" for eurozone debt, had aggravated EU debt fears.
By 08:50, the benchmark R157 bond was trading at 6.950%, from its previous close of 6.820%. The R207 was bid at 8.095% and offered at 8.100% from 7.985% and the R186 was trading at 8.350%, from its close of 8.240%.
The rand was bid at R7.4005 against the dollar from its previous close of R7.2886.
"It's very hard to call this market at the moment; we're going to have to get used to a lot of volatility. Foreigners sold a large parcel of stock yesterday and I gather it was on the swaps trade so the market is left with that residual to get rid of," said a local trader.
Absa Capital said in a morning report that Tuesday was another brutal day for local fixed-income with much of the damage done after a generally decent auction of R208 and R213s saw bid/cover just shy of 2.5x.
"In bonds, the R157 rose a further 18 basis points bringing the two day total rise to 38 basis points, the R208 by 14 basis points (38 basis points), and the R186 by 10 basis points (37bp).
"After outperforming on Monday, longer end swaps used Tuesday to catch up, with 10s weaker by 20 basis points on the day (and 43 basis points over the last 2 days) while 2s were down just 4 basis points (17 basis points)," the analysts said.
They added that given a decent rand recovery, from an open in the low R7.40s to a close nearer R7.30, the suggestion would be that the fixed-income sell-off isn't generating selling of the rand.
"Strikingly, the JSE data on bond flows for Monday suggest there was a net inflow of R1.7bn in the first day of this week. So, we aren't yet ready to give up our general view that EM countries like SA are likely to see trend inflows.
"What the market sell off does demonstrate is just how little local data releases matter at present as the Quarterly Bulletin looks to have been roundly ignored," they said.
Foreigners were net sellers of R7.543bn of South African bonds including repo transactions on Tuesday after net purchases of R1.687bn of local bonds on Monday, data released by the JSE shows.
Nominal cumulative volume was R242.832bn on Tuesday from R85.260bn on Monday.
Foreigners were net sellers of R7.467bn of South African bonds excluding repo transactions on Tuesday after net purchases of R1.700bn of local bonds on Monday.
For the year to date, foreigners have been net buyers of R46.828bn worth of local bonds, excluding repo transactions. In 2010 foreigners bought net R57.064bn worth of local bonds, excluding repo transactions.
For the year to date for total transactions, including repo transactions, foreigners have been net buyers of R37.556bn of local bonds. In 2010 they bought net R44.541bn worth of bonds.
Data released by the JSE showed that foreigners were net sellers of R7.543bn of South African bonds including repo transactions yesterday.
According to Standard Bank analysts, yesterday's poorly received Italian bond auction, combined with suggestions from officials that China should not be expected to be the "buyer of last resort" for eurozone debt, had aggravated EU debt fears.
By 08:50, the benchmark R157 bond was trading at 6.950%, from its previous close of 6.820%. The R207 was bid at 8.095% and offered at 8.100% from 7.985% and the R186 was trading at 8.350%, from its close of 8.240%.
The rand was bid at R7.4005 against the dollar from its previous close of R7.2886.
"It's very hard to call this market at the moment; we're going to have to get used to a lot of volatility. Foreigners sold a large parcel of stock yesterday and I gather it was on the swaps trade so the market is left with that residual to get rid of," said a local trader.
Absa Capital said in a morning report that Tuesday was another brutal day for local fixed-income with much of the damage done after a generally decent auction of R208 and R213s saw bid/cover just shy of 2.5x.
"In bonds, the R157 rose a further 18 basis points bringing the two day total rise to 38 basis points, the R208 by 14 basis points (38 basis points), and the R186 by 10 basis points (37bp).
"After outperforming on Monday, longer end swaps used Tuesday to catch up, with 10s weaker by 20 basis points on the day (and 43 basis points over the last 2 days) while 2s were down just 4 basis points (17 basis points)," the analysts said.
They added that given a decent rand recovery, from an open in the low R7.40s to a close nearer R7.30, the suggestion would be that the fixed-income sell-off isn't generating selling of the rand.
"Strikingly, the JSE data on bond flows for Monday suggest there was a net inflow of R1.7bn in the first day of this week. So, we aren't yet ready to give up our general view that EM countries like SA are likely to see trend inflows.
"What the market sell off does demonstrate is just how little local data releases matter at present as the Quarterly Bulletin looks to have been roundly ignored," they said.
Foreigners were net sellers of R7.543bn of South African bonds including repo transactions on Tuesday after net purchases of R1.687bn of local bonds on Monday, data released by the JSE shows.
Nominal cumulative volume was R242.832bn on Tuesday from R85.260bn on Monday.
Foreigners were net sellers of R7.467bn of South African bonds excluding repo transactions on Tuesday after net purchases of R1.700bn of local bonds on Monday.
For the year to date, foreigners have been net buyers of R46.828bn worth of local bonds, excluding repo transactions. In 2010 foreigners bought net R57.064bn worth of local bonds, excluding repo transactions.
For the year to date for total transactions, including repo transactions, foreigners have been net buyers of R37.556bn of local bonds. In 2010 they bought net R44.541bn worth of bonds.
